DUPAGE HIGH SCHOOL DISTRICT NO. 88 [Addison, IL] Audited Financial Statements And Supplementary Fin~ncial Information.

Transcription

1 [Addison, IL] Audited Financial Statements And Supplementary Fin~ncial Information June 30, 2013

2 TABLE OF CONTENTS Independent Auditors' Report.... Management's Discussion and Analysis... 4 Basic Financial Statements: Government-wide Financial Statements: Statement ofnet Position Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation ofthe Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statements of Activities Statement of Fiduciary Assets and Liabilities- Agency Fund Notes to Financial Statements... 22

3 TABLE OF CONTENTS Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual- General Fund Notes to Required Supplementary Information Schedule of Funding Progress Supplementary Financial Information: Combining and Individual Fund Schedules: Major Funds: General Fund: Combining Balance Sheet by Account Combining Schedule of Revenues, Expenditures and Changes in Fund Balances by Account Educational Account: Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual Operations and Maintenance Account: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Working Cash Account: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Debt Services Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Non-Major Funds: Combining Balance Sheet Non-major Governmental Funds Combining Schedule of Revenues, Expenditures and Changes in Fund Balances- Non-major Governmental Funds... 66

4 TABLE OF CONTENTS Transportation Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual Municipal Retirement/Social Security Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Capital Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fire Prevention and Safety Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fiduciary Funds- Agency Funds: Agency Funds - Student Activity Funds and Convenience Accounts - Schedule of Changes in Assets and Liabilities Other Financial Information: Schedule of Bonded Debt Maturities and Interest Tax Levy Summary Legal Bonded Debt Margin Summary of Operations- Bookstores Enrollment Data... 76

5 MATHIESON MOYSKI CELER (630) "--r r" T T P ~ '--"V '.J...;.J...;..L Board of Education DuPage High School District No. 88 Addison, IL Certified Public Accountants 211 South Wheaton Avenue, Suite 300 Wheaton, IL Independent Auditors' Report We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information ofdupage High School District No. 88 (the District), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Fax (630) MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ILLINOIS CPA SOCIETY

6 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the District, as of June 30, 2013, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison schedule(s) and schedule(s) of funding progress for post-employment benefits on pages 3 through 12 and 43 through 46 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The combining and individual fund schedules and other financial information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2

7 The other financial information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Report of Summarized Comparative Information We have previously audited DuPage High School District No. 88's 2012 financial statements and we expressed unmodified audit opinions on the respective financial statements of the governmental activities, each major fund, and the aggregate remaining fund information in our report dated November 5, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2012 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 31, 2013 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance. Wheaton, Illinois October 31,2013 3

8 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30, 2013 This discussion and analysis is intended to be an overview ofdupage High School District #88's (the District) financial activities for the year ended June 30, 2013, based on currently known facts, decisions, and conditions. This analysis focuses on current year activities and operations and should be read in combination with the basic financial statements that follow. This report, Management's Discussion and Analysis (MD&A) provides an overview of the District's financial activities for the fiscal year ended June 30, 2013 with comparative data to the fiscal year ended June 30, This format incorporates required information for the District to be in compliance with the provisions of the Governmental Accounting Standards Board. Financial Highlights The District's fund balances decreased by approximately $2.2 million during the fiscal year. Several factors contributed to this decrease: The District's fund balances declined due to planned deficits in operating funds and remaining Building the Future (BTF) construction initiatives. Investment earnings, that generated significant returns in the past, continue to decline due to historically low investment returns. General revenues accounted for $58.6 million in revenue or 78% of all revenues. Program specific revenues in the form of charges for services and fees and grants accounted for $16.7 million or 22% of total revenues of $75.3 million. The District had $79.9 million in expenses related to government activities. However, only $16.7 million of these expenses were offset by program specific charges and grants. The District continued to pay down its long term debt retiring $0.8 million of bond principal in fiscal Within the District's boundaries are nine Tax Increment Finance (TIF) areas spread across all three Village communities that cause the Equalized Assessed Valuation (EA V) of each area to be frozen until the TIF's are individually completed over twenty three years. There are three TIF areas scheduled to expire in the year 2017 for the following tax year cycle. This will bring in much needed financial resources as new taxable property and should help to relieve the tax burden to taxpayers. In addition to increasing salary and benefit costs, the operating costs continue to increase at a higher pace than the Consumer Price Index (which is used to determine the Property Tax Cap). The District continues to use bid solicitation to obtain the highest quality vendors at the most competitive pricing. The bus transportation service contract is multi-year set to expire in the year Food service management is on a multi-year agreement set to expire in the year Both contracts were renewed for at a cost increase of0.9% and 2.90% respectively. Subsequent years will be negotiated at a rate equal to a specific Consumer Price Index measure. Certified personnel base salaries were frozen with the agreement for only step advancement for which is a cost of approximately 2.6%. This two year agreement expired as of June 30, 2013 and a new agreement was established with salaries now in alignment with the Consumer Price Index. 4

9 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30, 2013 Support staff personnel and Teacher Aide salaries were negotiated at a pay increase of3% including a 1% non-compounding stipend. This two year agreement expired June 30, 2013 and bargaining took place during the summer Custodial and Maintenance personnel salaries were negotiated at a pay increase of 2% and this three year agreement will be in place until June 30, The District per capita tuition charge and the operating expenditure per pupil measure as of June 30, 2013 increased by $2,223 and $2,454 respectively. This is primarily due to the shift of alternative education student attendance to a regional Alternative Learning Opportunities Program (ALOP). The restructuring of program services as of has resulted in a reduction of 382 average daily attendance (ADA) days, approximately 10.5% of our total District ADA. The ALOP program provides significantly greater per pupil reimbursement funding but contributes to the change in this measurement ratio. Property tax revenues for the District's operating funds continue to be restricted by tax cap legislation. The consumer price index, which the 2011 levy was based on, increased by just 1.50%. Low growth in property tax revenues combined with stagnant new property growth has not been able to keep pace with expenditure increases. Overview of Financial Statements This financial report consists of four parts- the Independent Auditor's Report, Management's Discussion and Analysis (this section), the basic financial statements, and supplementary and other financial information. The basic financial statements include two kinds of statements that present different views of the District: The first two government-wide statements (Statement ofnet Position and Statement of Activities) provide both short-term and long-term information about the District's overall financial status. The remaining statements (Fund Financial Statements) focus on individual parts ofthe District, reporting the District's financial operation in more detail than the government-wide statements. These governmental fund statements tell how basic services such as regular and special education were financed as well as what remains for future spending. Fiduciary fund statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others to whom the resources belong. 5

10 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30,2013 The financial statements also include notes that explain some of the information in the statements and provide more detailed data. Figure A-1 summarizes the major features ofthe District's financial statements, including the portion of the District's activities they cover and the types of information they contain. The remainder of this overview section of Management's Discussion and Analysis highlights the structure and contents of each of the statements. Figure A-1 Major Features ofthe District-Wide and Fund Financial Statements District-Wide Fund Financial Statements Statements Governmental Funds Fiduciary Funds Scope Entire district The activities ofthe district Instances in which the (except fiduciary that are not proprietary or district administers funds) fiduciary, such as instruction, resources on behalf of administration, building someone else, such as maintenance, food service, student activity funds and community education Required Statements of net Balance sheet Statement of financial position Statement of revenue, fiduciary assets and statements Statement of expenditures and changes liabilities activities in fund balances Accounting Accrual accounting Modified accrual accounting Accrual accounting and basis and and economic and current financial focus economic resources measurement resources focus focus focus Type of All assets and Generally assets expected to All assets and asset/liability liabilities, both be used up and liabilities that liabilities, both shmiinformation financial and capital, come due during the year or term and long-term short-term and long- soon thereafter; no capital term assets or long-term liabilities included Type of All revenues and Revenues for which cash is All additions and inflow/out flow expenses during received during or soon after dedications during the information year, regardless of the end of the year; year, regardless of when cash is expenditures when goods or when cash is received received or paid services have been received or paid and the related liability is due and payable 6

11 Reporting the District as a Whole Government-Wide Statements DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30, 2013 The government-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Position includes all ofthe District's assets and liabilities. All ofthe revenues and expenditures are accounted for in the Statement of Activities regardless of when the cash is received or paid. The two government-wide financial statements report the District's net position and how it has changed. Net position- the difference between the District's assets and liabilities- is one way to measure a district's financial health or position. Over time increases or decreases in the District's net position is an indicator of whether its financial position is improving or deteriorating, respectively. To assess the District's overall position you need to consider additional non-financial factors such as changes in the District's property tax base and the condition of the school buildings. In the government-wide financial statements the District's activities are shown in one category: Governmental Activities- Most of the District's basic services are included here, such as regular and special education, administration, transportation, food service, and support services. Property taxes, investment earnings, and non-restricted state aid finance most of these activities. Reporting the District's Most Significant Funds Fund Financial Statements The fund financial statements provide more detailed information about the District's funds, focusing on the most significant or major funds, not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by state law and by bond covenants. The District established other funds to control and manage money for particular purposes (such as repaying long-term debt) or to show that it is properly using certain revenues (such as working cash). The District has two kinds of funds: Governmental Funds- Most of the District's basic services are included in the governmental funds, which generally focus on (1) how cash, and other financial assets that can readily convert to cash, flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term 7

12 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30,2013 view that helps to determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. Because this information does not encompass the additional long-term focus ofthe district-wide statements, we provide additional information that explains the relationship (or differences) between them. Fiduciary Funds- The District is the trustee, or fiduciary, for assets that belong to others, such as the student activity funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and only by those to whom the assets belong. These activities are excluded from the government-wide financial statements because the District cannot use these assets to finance its operations. Financial Analysis of the District as a Whole Net Position: The District's combined net position was $24,311,499 on June 30, This was a decrease of 15.9% from the prior year (See Table A-1). Table A-1 DuPage High School District #88 Net Position Governmental Activities June 30, 2013 and Assets: Current and Other Assets $80,319,756 Capital Assets 121,717,670 Total Assets 202,037,426 Liabilities: Long Term Liabilities (Long Term Debt) 119,309,583 Other Liabilities (Including Deferred Revenue) 58,416,344 Total Liabilities 177,725,927 Net Position: Invested in Capital Assets, Net of Related Debt 15,441,844 Restricted 3,396,894 Unrestricted 5,472,761 Total Net Position $24)11! $78,844, ,032, ,876, ,323,770 54,645, ,969,378 18,389,615 4,215,624 6,302,142 $28!907!3 81 The District's decrease in net position is primarily attributable to the continued and planned spend down of capital projects. Despite the spend down of capital project funds, net capital assets has remained relatively unchanged due to the offset of current year depreciation. Investment returns further eroded due to historic low rates of return and fewer funds to invest. The district also experienced operating fund expenditures, albeit budgeted, that exceeded revenues thus contributing to the decline as well. 8

13 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30, 2013 Changes in Net Position: The District's decrease in net position was $4,595,882 for the fiscal year ended June 30, TableA-2 DuPage High School District #88 Change in Net Position For the Years Ended June 30, 2013 and 2012 Revenues: Program Revenue Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenue Property Taxes Unrestricted State and Federal Aid Investment Earnings Other Total Revenues Expenses: Instruction Student and Staff Support Administration Business Support Operations and Maintenance of Facilities Transportation Food Service Other Interest on Long-Term Debt Total Expenses Increase (Decrease) in Net Position Beginning Net Position Ending Net Position 2013 $1,511,360 15,145,700 53,547,707 2,977, ,322 1,987,578 75,279,476 47,387,022 8,433,772 5,536,184 1,014,004 6,127,653 3,496,395 1,158,182 1,551,531 5,170,615 79,875,358 ( 4,595,882) 28,907,381 $24.311,499 $1,553,807 13,356,903 9,529 52,890,744 2,628, ,314 1,665,035 72,231,530 45,352,338 7,656,021 5,482, ,037 6,113,331 3,184,491 1,075,518 1,680,258 5,186,573 76,725,348 ( 4,493,818) 33,401,199 $28,907,381 The District's total revenues were $75,279,476 for the year ended June 30, 2013, an increase of$3,047,946 over the prior year (See Table A-2). Property taxes were the main driver of the increase. 9

14 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30, 2013 The total cost of all programs and services was $79,875,358 for the year ended June 30, 2013, an increase of$3,150,010 from the prior year. The District's expenses are predominantly related to instruction and student and staff support with these areas accounting for 69.9% oftotal expenses. Operations and Maintenance of facilities accounted for 7.7% of expenses. Expenditures for fiscal year 2013 exceeded revenues by 6.1 %. Revenues increased by 4.2% (See Table A-2). Governmental Activities Expenses for governmental activities are divided into categories as reflected in Table A-3. Please note that the total cost of the services is offset in some cases by charges or fees for the services and in some cases by state and federal grants and contributions. Table A-3 DuPage High School District #88 Net Cost of Governmental Activities For the Years Ended June 30, 2013 and 2012 Total Cost of Services Net Cost of Services Regular Instruction $29,093,215 $27,568,199 $19,542,333 $19,394,381 Special Instruction Programs 13,377,363 12,937,314 9,213,943 8,899,045 Other Instruction Programs 4,916,444 4,846,825 4,916,444 4,846,825 Student Support Services 6,866,855 6,243,082 6,747,115 5,823,997 Instructional Staff Support 1,566,917 1,412,939 1,473,708 1,299,307 Administration/Business 6,550,188 6,476,818 6,550,188 6,476,818 Operations/Maintenance 6,127,653 6,113,331 6,127,653 6,103,802 Transportation 3,496,395 3,184,491 2,062,276 2,274,899 Food Service 1,158,182 1,075,518 (137,508) (180,796) Other 1,551,531 1,680,258 1,551,531 1,680,258 Interest on Long-Term Debt 5,170,615 5,186,573 5,170,615 5,186,573 Total $791875)58 _$76)2\348 $631218,298 $61,805,109 The cost of all governmental activities this year is $79,875,358 Some of that cost was financed by the users of the District's programs ($1,511,360). The State and Federal government subsidized certain programs with grants and contributions ($15,145,700). Most of the District's programs and operations were supported with local property taxes. 10

15 Financial Analysis of District Funds DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30,2013 The financial performance of the District is also reflected in its government funds throughout the Fund Financial Statements. Revenues for the District's governmental funds were $75,279,476 while expenditures in the governmental funds were $77,491,497 (both of these figures include "on-behalf' payments from TRS). The beginning fund balance for fiscal year 2013 in the governmental funds was $23,362,654. The fund balance in government funds was $21,150,633 at the end of fiscal year The primary reason for the decrease in the fund balance was the planned spend down in capital projects, and an operating budget deficit. The budget has been challenged due to expenditures growing at a faster pace than revenues. General Fund Highlights The following schedule represents a summary of General Fund Revenues: General Fund Revenues Year Ended Year Ended Local Sources $46,744,240 $45,931,345 State Sources 6,059,338 5,011,219 Federal Sources 2,179,468 2,885,849 On Behalf Payments 8,440,584 7,187,967 Total General Fund Revenue $63,423,630 $61,016,380 The following schedule represents a summary of General Fund expenditures: General Fund Expenditures Year Ended Year Ended Instruction $33,532,829 $32,361,290 Supporting Services 21,273,272 20,299,486 Non-Programmed Charges 1,450,000 1,816,076 On Behalf Payments 8,440,584 7,187,967 Total General Fund Expenditures $64,696,685 $61,664,819 The total General Fund expenditures of $64,696,695 exceeded General Fund revenues of $63,423,630 that resulted in expenditures exceeding revenues by $1,273,055. As a result of this 11

16 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30, 2013 variance and net transfer in of $12,030, the fund balance in the General Fund decreased by $1,261,025. Although the district ended with a deficit, the amount was less than the budgeted shortfall of$2,227,509. This under-expenditure was primarily due to lower than expected salary and pension expense combined with controlled expenditures in contracted services, supplies and capital outlay. In addition, approximately $250,000 of planned technology expenditures did not materialize. Debt Services Fund: Total revenues in the Debt Services Fund were $6,321,572, while expenditures totaled $6,283,281. The fund balance, after transfers, in the Debt Services Fund ended with $214,616 on June 30, 2013 compared to $180,100 on June 30,2012. Non-Major Funds: Total revenue in the Special Revenue Funds (Transportation and Municipal Retirement/Social Security) was $5,3 76,316 and total expenditures were $5,670,004. When accounting for interest transfers, the net decrease in fund balance in these funds was $301,943. A greater propm1ion of the future tax levy will be allocated to the Municipal Retirement and Social Security levies to accommodate the growth in benefit costs. The District's Capital Projects Fund, as required by the Illinois State Board of Education, accounts for all of the Building the Future construction activity. Total revenues in the Capital Projects Fund were $157,728, while expenditures totaled $841,527. As a result ofthis activity, the fund balance in the Capital Projects Fund ended with $292,445 on June 30, 2013 compared to $976,244 on June 30, In the Fire Prevention and Safety Fund, the fund balance increased by $230 to $659. The District has completed all required safety improvements and is not scheduled to update their State Board of Education required decennial facility review until the year General Fund Budget Information In the General Fund's Educational Account budget, total revenue (when removing TRS On-behalf payments) was anticipated to be $48,935,494 and actual revenue (again when removing TRS Onbehalf payments) was $48,802,997. This resulted in an unfavorable variance of$132,497 when compared to the budget. In the General Fund's Educational Account budget, total expenditures (when removing TRS Onbehalf payments) were projected to be $51,475,130 and actual expenditures (again when removing TRS On-behalf payments) totaled $50,695,445. The overall shortfall was less than expected primarily due to positive variances in salary and pension expenses combined with lower than expected contracted and supply costs. In addition, some technology investments were deferred and the expenses did not materialize. The budget continues to be challenged and is a result of constrained revenues that have not been able to keep pace with expenditures due to extraordinary 12

17 DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30,2013 economic conditions. The district has worked tirelessly to balance resources with a comprehensive academic program that is expected by the community. The district continues to make great strides and set milestones with academic achievements. Capital Assets and Debt Administration Capital Assets: At the end of fiscal year 2013 the District had a net total of$121,717,670 in capital assets. A breakdown of net capital assets follows: Capital Assets- Governmental Activities Balance Balance June 30,2013 June 30, 2012 Land $ 4,162,325 $ 4,162,325 Construction in Progress 425,960 86,772 Land Improvements 21,224,731 21,146,963 Buildings 135,118, ,554,533 Equipment 13,632,379 13,321,234 Total Capital Assets 174,563, ,271,827 Less: Accumulated Depreciation 52,846,224 48,239,649 Net Capital Assets $121)17!670 $125!032) 78 More detailed information about capital assets can be found in Note 4 in the financial statements. Also see Note 8 for commitments related to capital expenditures. Long-Term Debt: At the end of fiscal year 2013 the District had $119,309,583 outstanding in long-term debt. More detailed information about long-term debt can be found in Note 5 in the financial statements. Next Year's Budget The District's fiscal year 2014 budget projects a deficit of approximately $2.4 million in the Educational Fund. About $1.0 million of the variance can be attributed to the continued technology initiatives. The deficit has been curtailed as a result of previous cost containment initiatives that included staff reductions and/or freezes on all non-labor expenditures. The district is fortunate to have adequate reserves to accommodate these shortfalls, however, revenue and expenditure trends will continue to be carefully monitored. 13

18 Factors Bearing on the District's Future DuPage High School District #88 Management's Discussion and Analysis For the Year Ended June 30,2013 The District is dependent on local sources for the majority of its revenue and the property tax cap legislation continues to limit the revenue the District can realize from its tax levy. In addition, the current economic climate has caused reductions in property values and significantly reduced new property growth. Interest income has dropped significantly as well due to historically low investment returns and less funds to invest. Although State Aid has modestly increased, due to a rise in poverty counts, future reductions and/or prorated state funding is anticipated to continue. These identified revenue constraints, of which the district has little control, continues to place significant pressure on the district's budget to maintain a high quality educational standard. The Administration will continue to evaluate revenue and expense trends and propose recommendations as appropriate to the Board of Education to maintain the highest educational standards in District 88. The Board of Education is committed to working toward correlating future salary contracts with the Consumer Price Index factor, which is used to limit the annual property tax revenue for the District under the Property Tax Extension Limitation Law. In addition, almost 2 out of every 4 students now qualify for the Free and Reduced Breakfast and Lunch Program which the district is mandated to provide. The district is required to not only provide meals throughout the year, but also offer a meal program during the summer months to anyone over the age of eighteen who wishes to stop in and eat. This mandated and essential program, while partially supported by federal reimbursement, is expensive to run and manage. Furthermore, there is a corresponding decline in local revenue from the waiver of registration fees for these students who are in need of such support. Special Education costs continue to increase significantly with the revision to the federal requirements. Tuition placement costs have increased by 12% on average over the past three fiscal years. Meanwhile the level of state and federal funding assistance remains relatively flat, which is creating financial pressure on the school district. In today's economic climate, especially in the State of Illinois, we cannot reasonably expect funding to increase in any significant way. Contacting the District's Financial Management This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Edward Hoster, Chief Financial Officer, DuPage High School District #88, 2 Friendship Plaza, Addison, Illinois

19 STATEMENT OF NET POSITION JUNE 30,2013 WITH COMPARATIVE TOTALS FOR 2012 Governmental Activities Assets: Cash and investments $ 46,360,086 $ 48,566,157 Receivables: Prope1ty taxes 30,653,028 26,865,044 Other governments 1,518,797 1,728,586 Other 11,252 21,175 Inventories 620, ,221 Prepaid health insurance 403, ,079 Bond issuance costs, net 752, ,319 Capital assets: Land and construction in progress 4,588,285 4,249,097 Other capital assets, net of depreciation 117,129, ,783,081 Total assets $ 202,037,426 $ 203,876,759 Liabilities: Accounts Payable $ 932,802 $ 696,982 Payroll deductions payable 5,730 4,948 Unearned revenue 57,477,812 53,943,678 Long-term liabilities Due within one year 3,365, ,000 Due in more than one year 115,944, ,483,770 Total liabilities 177,725, ,969,378 Net Position: Invested in capital assets, net of related debt 15,441,844 18,389,615 Restricted for: Capital projects 293, ,673 Debt service 967,395 1,016,419 Transportation 2,136,395 2,222,532 Unrestricted 5,472,761 6,302,142 Total net position $ 24,311,499 $ 28,907,381 The notes to the financial statements are an integral part ofthis statement. 15

20 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30,2013 WITH COMPARATIVE TOTALS FOR 2012 Net (Expense) Revenue and Changes in Program Revenues Net Position Operating Total Governmental Charges for Grants and Activities Functions Expenses Services Contributions Governmental activities: Instructional services: Regular programs $29,093,215 $ 925,654 $ 8,625,228 $ (19,542,333) $ (19,394,381) Special programs 13,377,363 4,163,420 (9,213,943) (8,899,045) Other programs 4,916,444 (4,916,444) ( 4,846,825) Supporting services: Students 6,866, ,740 (6,747,115) (5,823,997) Instructional staff 1,566,917 93,209 (1,473,708) (1,299,307) District administration 1,186,601 (1' 186,601) (1,233,351) School administration 4,349,583 ( 4,349,583) (4,249,430) Business 1,014,004 (1,014,004) (994,037) Operation and maintenance of facilities 6,127,653 (6,127,653) (6,103,802) Transportation 3,496,395 1,434,119 (2,062,276) (2,274,899) Food service 1,158, , , , ,796 Staff 1,395,446 (1,395,446) (1,513,604) Other 45,513 (45,513) (51,333) Community services 110,572 (110,572) (115,321) Interest on long-term liabilities 5,170,615 (5, 170,615) (5, 186,573) Total school district $79,875,358 $ 1,511,360 $15,145,700 (63,218,298) (61,805,109) General revenues: Property taxes levied for: General purposes 43,411,008 42,793,870 Transpmiation 2,010,473 1,979,903 Retirement 1,808,063 1,779,453 Debt service 6,318,163 6,337,518 Federal and state aid not restricted to specific purposes 2,977,809 2,628,198 Earnings on investments 109, ,314 Miscellaneous 1,987,578 1,665,035 Total general revenues 58,622,416 57,311,291 Change in net position ( 4,595,882) ( 4,493,818) Net position - beginning 28,907,381 33,401,199 Net position - ending $ 24,311,499 $ 28,907,381 The notes to the financial statements are an integral part of this statement. 16

21 DUP AGE HIGH SCHOOL DISTRICT NO. 88 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2013 Other Total Debt Governmental Governmental General Services Funds Funds ASSETS Cash and investments $ 38,303,337 $ 4,299,866 $ 3,756,883 $ 46,360,086 Receivables (net of allowance for uncollectibles ): Property taxes 23,744,741 4,705,980 2,202,307 30,653,028 Intergovernmental 1,214, ,701 1,518,797 Other 9,397 1, ,252 Inventory 620, ,141 Prepaid health insurance 403, ,673 TOTAL ASSETS $ 64,295,385 $ 9,006,931 $ 6,264,661 $ 79,566,977 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $ 469,644 $ $ 463,158 $ 932,802 Accrued payroll expenditures 5,730 5,730 Deferred revenue 44,571,997 8,792,315 4,113,500 57,477,812 Total Liabilities 45,047,371 8,792,315 4,576,658 58,416,344 Fund Balance: Nonspendable 1,023,814 1,023,814 Restricted 214,616 2,429,499 2,644,115 Committed 3,049,663 3,049,663 Unassigned 15,174,537 (741,496) 14,433,041 Total Fund Balance 19,248, ,616 1,688,003 21' 150,633 TOTAL LIABILITIES AND FUND BALANCE $ 64,295,385 $ 9,006,931 $ 6,264,661 $ 79,566,977 The notes to the financial statements are an integral part of this statement. 17

22 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30,2013 Amounts reported for governmental activities in the statement of net position are different because: Total fund balance - governmental funds Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $174,563,894 and the accumulated depreciation is $52,846,224. Bond issuance costs are reported as expenditures in the governmental funds. The cost is $1,154,896 and accumulated ammtization is $402,117. Long-term liabilities, including bonds payable and capital leases, are not due and payable in the current period and therefore are not reported in the funds. Bonds payable Deferred amounts for issuance discount/premium Deferred amounts on refunding lmrf net pension obligation Net other post employment benefits obligation Total net position - governmental activities $ 21,150, ,717, ,779 (115,81 0,000) (2,783,463) 148,725 (430,775) (434,070) $ 24,311,499 The notes to the financial statements are an integral part of this statement. 18

23 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30,2013 Other Total Debt Governmental Governmental General Services Funds Funds REVENUES: Prope1ty taxes $ 43,411,008 $ 6,318,163 $ 3,818,536 $ 53,547,707 Other1oca1sources 3,333,232 3, ,619 3,618,260 State sources 14,499,922 1,434,119 15,934,041 Federal sources 2,179,468 2,179,468 Total Revenues 63,423,630 6,321,572 5,534,274 75,279,476 EXPENDITURES: Current operating: Instruction 33,532,829 60,626 33,593,455 Supporting services 29,713,856 6,450,905 36,164,761 Community services 110, ,572 Payments to other districts and governmental units 1,339,428 1,339,428 Debt service: Payment of principal on long-term debt 840, ,000 Interest on long-term debt 5,441,250 5,441,250 Service charges and bond issuance costs 2,031 2,031 Total Expenditures 64,696,685 6,283,281 6,511,531 77,491,497 Excess (deficiency) ofrevenues over expenditures (1,273,055) 38,291 (977,257) (2,212,021) OTHER FINANCING SOURCES (USES): Transfers in 31,487 31,487 Transfers out (19,457) (3,775) (8,255) (31,487) Total other financing sources (uses) 12,030 (3,775) (8,255) Net change in fund balances ( 1,261,025) 34,516 (985,512) (2,212,021) Fund balances at beginning of year 20,509, ,100 2,673,515 23,362,654 FUND BALANCES AT END OF YEAR $ 19,248,014 $ 214,616 $ 1,688,003 $ 21,150,633 The notes to the financial statements are an integral part of this statement. 19

24 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2013 Amounts repmted for governmental activities in the statement of activities are different because: Net change in fund balances-total governmental funds $ (2,212,021) Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets with an initial, individual cost of more than $2,500 are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays and loss on disposal of capital assets in the current period. Capital outlays Depreciation expense 1,337,429 (4,651,937) (3,314,508) The governmental funds report bond and other debt issuance proceeds as an other financing source, while repayment of principal is repmted as an expenditure. Also, governmental funds report the effect of defeasance, issuance costs and premiums when debt is first issued, whereas these amounts are deferred and ammtized in the statement of activities. Interest is recognized as an expenditure in the governmental funds when it is due. In the statement of activities, interest expense is recognized as it accrues, regardless of when it is due. Changes in net other post employment benefits obligations are reported only in the statement of activities. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Change in net position of governmental activities Repayment of bond principal Amortization of bond issuance costs Ammtization of bond discount Ammtization of deferred amounts on refunding Increase in IMRF net pension obligation Increase in net post employment benfit obligation 840,000 (83,540) 390,968 (36,793) (90,912) :.::(8~9,~07.:...:6~) 930,647 $ ( 4,595,882) The notes to the financial statements are an integral part of this statement. 20

25 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND JUNE 30,2013 Assets: Cash and investments $ Student Activity Funds 885,256 Liabilities: Due to student organizations Total liabilities $ $ 885, ,256 The notes to the financial statements are an integral part of this statement. 21

26 Notes to Financial Statements June 30, 2013 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: DuPage High School District No. 88 (District) is governed by an elected Board of Education. The accounting policies of the District conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A summary of the significant accounting policies, consistently applied in the preparation of the accompanying financial statements is described below. a. The Reporting Entity The District includes all funds of its governmental operations that are controlled by or dependent upon the District as determined on a basis of financial accountability. Financial accountability includes appointment of the organization's governing body, imposition ofwill, and fiscal dependency. The accompanying financial statements include only those funds and account groups of the District as there are no other organizations for which it has financial accountability. Joint Ventures- The District is also a member of the following organizations: - School Association for Special Education in DuPage County (See Note 18) - DuPage Area Occupational Education System (See Note 19) b. Basis of Presentation The District's basic financial statements consist of government-wide statements, including a statement of net position and a statement of activities, and fund financial statements which provide a more detailed level of financial information. 1. Government-wide Financial Statements (GWFS): The statement of net position and the statement of activities display information about the District as a whole. These statements include the financial activities of the District, except for fiduciary funds. The effects of interfund activity have been eliminated. The statement of net position presents the financial condition of the governmental activities of the District at year-end. The statement of activities presents a comparison between direct expenses and program revenues for each program or function of the District's governmental activities. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. 22

27 DUP AGE HIGH SCHOOL DISTRICT NO. 88 Notes to Financial Statements (Cont'd) June 30, 2013 Program revenues include charges paid by the recipient of the goods or services offered by the program, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Property taxes and other revenues which are not classified as program revenues are presented as general revenues of the District. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. 2. Fund Financial Statements (FFS): The accounts of the District are organized and operated on the basis of funds. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds maintained is consistent with legal and managerial requirements. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the GWFS. Major individual governmental funds are reported as separate columns in the FFS. The District reports the following major governmental funds: The General Fund is the District's primary operating fund. It accounts for all financial resources of the District, except those required to be accounted for in another fund. The General Fund consists of the Educational Account, Operations and Maintenance Account, and Working Cash Account that are legally mandated by the State of Illinois. The Debt Services Fund accounts for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. Additionally, the District reports the following fund types: The Agency Fund- Student Activity Funds and Convenience Accounts (a fiduciary fund) accounts for assets held on behalf of student groups and others. c. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-wide financial statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue when measurable and available. 23